By Abdullah ShahWith Vedanta’s demerger coming up, we look at the revenue mix of the segments set to be demerged, and the company’s historical dividends from FY18-25. The company first unveiled plans to demerge its aluminium, oil& gas, iron ore, power and base metals businesses in September 2023. However, the company later announced that it would retain the base metals arm, and not spin it off.
Anil Agarwal, chairman of Vedanta, said, “The upcoming demerger of our diverse verticals that represent more than 15 commodities, will see us progress from being asset managers to asset owners.”
Vedanta shareholders will receive one share in all the subsidiaries for every share held in the company in the demerger. After receiving approval from the National Company Law Tribunal (NCLT), Vedanta’s board has scheduled a meeting for February 18 to seek shareholder approval for the demerger.
Vedanta has declared four dividends each in FY23 and FY25 (as of Jan 24). However, the board only sent out two dividends each in FY18 and FY19, while FY20 and FY21 witnessed only one dividend each due to the COVID lockdown.
Vedanta offers higher dividend post COVID
Vedanta has disbursed a total dividend of Rs 43.5 per share in FY25 with a dividend yield of 9.8% at a trailing twelve-month (TTM) dividend payout ratio of 150%. This indicates that the company spent 150% of its net profits (TTM) on dividends during the year. This was funded by a qualified institutional placement (QIP) worth Rs 8,500 crore of 19.3 crore shares on July 21, 2024.
This metals & mining company’s 29.7% and 23% dividend yield in FY23-24, respectively, was much higher than in FY25. This was due to the company providing higher dividends of Rs 81 per share and Rs 50 per share in these financial years compared to FY25. Another factor contributing to the higher dividend yields in FY23-24 was the stock price declining by 32% and 1% during the same period, compared to a 64.8% growth in FY25 so far.
Vedanta’s demerger to help streamline operations
According to Vedanta, the demerger will simplify its corporate structure by creating sector-focused businesses, and will give investors direct investment opportunities in dedicated pure-play companies.
Base metals & aluminium contribute to more than 70% of revenue
The demerged entities will be named Vedanta Aluminium Metal (aluminium), Talwandi Sabo Power (power), Malco Energy (power), and Vedanta Iron & Steel (iron ore).
The company’s aluminium business is the largest to be demerged by Vedanta. It generated a revenue of Rs 48,371 crore in FY24 while contributing 34.1% of the company’s total revenue of Rs 1.4 lakh crore, driven by aluminium production rising 3% YoY to 2,370 kt, its highest-ever annual production. The oil & gas business posted a revenue of Rs 17,837 crore in FY24, contributing to 12.6% of its total revenue.
Vedanta’s base metals & aluminium segments surge post COVID
Meanwhile, the company’s power and iron ore businesses fetched Rs 6,153 crore and Rs 9,069 crore in revenue respectively, in FY24. The power business grew on the back of its production rising 25% YoY, while the iron ore business improved due to a 5% YoY and an 18% YoY rise in iron ore and ferrous alloys production, respectively. These businesses contributed 4.3% and 6.4% to the company’s revenue during the year. The base metals business, which will not be demerged, includes copper and zinc mining; and brought in Rs 51,211 crore in revenue during FY24. This business contributed to 36.1% of its revenue during the year.
Post the demerger, Vedanta plans to list the demerged entities as and when it gets approvals from the respective regulatory authorities